Law Technology Today From the ABA Legal Technology Resource Center
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Companies that specialize in improving invoicing quality and who work with both partners and administrators in firms know that, while both constituencies share a number of common business goals, administrators tend to see different risks and challenges related to e-billing than their partner and timekeeper colleagues. This article will explore some of those similarities and differences.
Law firm administrators and firm billing partners have perspectives that both overlap and diverge when it comes to one of the most critical business processes in any law firm: the process for getting effective, accurate and compliant invoices out the door and into the hands of clients. Of course, this process is critical because it’s not just about delivering the invoice, but also about being paid the most for the work performed, as quickly as possible and without the high frictional costs of disputed line items.
There are two desired improvements to the law firm e-billing process that administrators and partners absolutely share in common. The inefficiencies of the pre-billing process and client-driven adjustments rank highest as frustrations for both.
Said another way, both groups are looking for tools and resources which:
- Reduce the time required of billing partners in the pre-billing process. A slimming down of administrative pre-billing hours means more time to work on client-related matters and thus more billing.
- Increase line-item accuracy and compliance with client billing guidelines. Fewer client adjustments, maximized payments and a reduced need for appeals are each a huge win for law firms.
Unlike the partners in their firm, however, administrators are more likely to identify core risks in their internal e-billing process often not recognized by others. This is possibly because they view invoice preparation as more of a true business process, and not just as a description of work performed.
The risks commonly described by administrators fall neatly into three primary categories:
- The risk of not having the right billing expertise within firm (the need for Knowledge Outsourcing);
- The risk of over reliance on one or two specific individuals who are critical to the firm’s invoicing process (the need to Reduce Risk); and
- The risk of not being able to produce actionable invoicing metrics and data that can be used to make things better (the need for Advanced Reporting and Analytics).
Further analysis of these three risks is helpful in analyzing the challenges of e-billing for firms.
E-BILLING KNOWLEDGE AND EXPERTISE
The rapid growth of knowledge outsourcing in law firms is a function of recognizing what falls within a firm’s core competencies and what does not. When it comes to e-billing, law firms are most challenged by their lack of access to three core assets:
EXPERT SKILLS
For most law firms, the invoicing skill set stems from a loosely knit fabric of billing experience spread across the firm. The billing department has some expertise, administrators have some expertise, but just as often it’s the time-challenged billing partner with the most experience. These experiential components of the process often don’t work together as seamlessly as they should, and the sum of the parts are not likely to add up to what’s really needed to have a highly functional and effective invoicing process.
RELEVANT TECHNOLOGY
The reality is that law firm invoicing technologies, including the core time and billing systems as well as invoice delivery solutions, simply don’t have the reporting structures or rules intelligence that drive the compliance necessary to meet clients’ invoicing standards. While some time and billing systems now incorporate so-called key word filters and other rudimentary and basic checking functionality, this does not really get to the technology really needed by firms.
More specifically, what firms require is technology just as sophisticated as the platforms their clients are using to review the invoices themselves. Relevant technology keeps law firms current and completely in sync with their clients’ invoicing requirements.
EXPERT FOCUS
Even though firms have been struggling with it for years, e-billing is a relatively new function for them. It requires unique knowledge sets which have not, at least to date, really shown up on the firm side in any structured way. The discipline and focus on this new function are heavily evident on the payer side, as the payer industry has invested billions in e-billing software and third-party auditors, but there has been no parallel adoption of that concept by firms. Continuing on the existing path without a focus on building the function and adopting expert skills and relevant technology is simply a recycling of existing ideas which will continue to deliver limited returns for firms.
For these reasons, administrators are increasingly looking to invoice preparation partners to find these critical skills, technology and focus.
OVER RELIANCE ON KEY BILLING PERSONNEL
Many law firms rely heavily on one or two (or a small handful) of billing specialists, whose role is to shepherd the pre-billing process, get the invoice out the door and address invoicing conflicts with firm clients. When those resources are overwhelmed with work or have conflicts of any type, the process bogs down. That in turn presents financial risk to the firm.
This general concept of risk being generated when business-critical processes rest in the hands of a limited number of internal experts is certainly not new. It is a well-recognized idea taught in business schools and written about extensively. This is sometimes referred to as “hero culture,” where it’s generally perceived that only one or two specific people know enough about the subject to deal with it. The risk of course is created by the possibility of those heroes leaving the company, their not having enough resources or even not having as much knowledge about the subject as they are perceived to.
While this problem is gaining more attention, it has been historically rare to hear managing partners identify this risk, even as they describe its primary component – over reliance on one or two employees for a business-critical process. “Our invoicing process relies entirely on John and Sally,” or “All of our invoices are issued by Larry” or “All of our appeals are handled by Laura” – such comments are quite common. Administrators, however, have been acutely aware of this risk all along.
The ability to partner with invoice preparation companies helps to reduce this risk, since work can be spread across more experts with greater and more variable availability. Getting high-quality invoices out the door in a timely fashion ceases to be a challenge.
ACTIONABLE BILLING DATA AND ANALYTICS
To the frustration of both administrators and billing partners, firms remain data-poor. This is particularly true in the invoicing arena. This situation can be very frustrating for firm leaders, since their clients are data-rich with invoicing data. In fact, some clients have been known to suggest that they know more about how their firms practice than the firms do themselves.
Many firms think about data as it appears in their time and billing system. Which timekeepers have billed the most? Which clients are producing the most billable activity? What clients owe us money? These questions are less about effecting change and more about measuring the status quo.
For firms interested in bringing about real performance change, the most relevant data may reside in the details of the adjustments clients make to the invoices submitted. It is in these adjustments that each client is laying down what is really expected of the firm. Put another way, firm leaders might view client adjustments to their invoices as the delta between the way the firm practices and how the client would prefer they practice. And that delta, if reverse-engineered, maps the behavior the firm needs to institute to run better in the eyes of their clients.
IN SUMMARY
Access to new areas of billing expertise, reducing financial and operational risk to the firm and securing advanced reporting that is both actionable and relevant are the objectives administrators’ voice frequently. As they and the billing partners they work with push to achieve the common objectives of a more efficient invoicing process and maximized revenue, one might predict that these objectives will be adopted by partners and timekeepers across the firm as well.
